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Parental altruism under imperfect information: Theory and evidence

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  • Ernesto Villanueva

Abstract

Can we reconcile the predictions of the altruism model of the family with the evidence on parental monetary transfers in the US? This paper provides a new assessment of this question. I expand the altruism model by introducing effort of the child and by relaxing the assumption of perfect information of the parent about the labor market opportunities of the child. First, I solve and simulate a model of altruism and labor supply under imperfect information. Second, I use cross-sectional data to test the following prediction of the model: Are parental transfers especially responsive to the income variations of children who are very attached to the labor market? The results of the analysis suggest that imperfect information accounts for many of the patterns of intergenerational transfers in the US.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 566.

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Date of creation: Sep 2001
Date of revision: Sep 2002
Handle: RePEc:upf:upfgen:566

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Web page: http://www.econ.upf.edu/

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Keywords: Altruism; intergenerational transfers; private information;

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Citations

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Cited by:
  1. Joseph G. Altonji & Ernesto Villanueva, 2003. "The Marginal Propensity to Spend on Adult Children," Working Papers 90, Barcelona Graduate School of Economics.
  2. Yang-Ming Chang, 2009. "Strategic altruistic transfers and rent seeking within the family," Journal of Population Economics, Springer, vol. 22(4), pages 1081-1098, October.
  3. Javier OLIVERA ANGULO, 2011. "The division of parental transfers in Europe," Center for Economic Studies - Discussion papers ces11.20, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
  4. Elin Halvorsen & Thor Olav Thoresen, 2008. "Parents' Desire to Make Equal Inter Vivos Transfers," CESifo Working Paper Series 2468, CESifo Group Munich.
  5. Jellal, Mohamed, 2009. "A Theory of Educational Inequality Family and Agency Costs," MPRA Paper 17434, University Library of Munich, Germany.
  6. Jellal, Mohamed, 2009. "Family Capitalism Corporate Governance Theory," MPRA Paper 17886, University Library of Munich, Germany.
  7. Mohamed Jellal & FranÁois-Charles Wolff, 2003. "Leaving Home as a Self-selection Device," Economica, London School of Economics and Political Science, vol. 70(279), pages 423-438, 08.
  8. Giacomo Pasini & Rob Alessie & Viola Angelini, 2011. "Is it true love? Altruism versus exchange in time and money transfers," Working Papers 2011_27, Department of Economics, University of Venice "Ca' Foscari".
  9. Fernandes, A., 2000. "Altruism with Endogenous Labor Supply," Papers 0002, Centro de Estudios Monetarios Y Financieros-.
  10. François-Charles Wolff, 2006. "Parental transfers and the labor supply of children," Journal of Population Economics, Springer, vol. 19(4), pages 853-877, October.
  11. Ana Fernandes, 2011. "Altruism, labor supply and redistributive neutrality," Journal of Population Economics, Springer, vol. 24(4), pages 1443-1469, October.
  12. Elin Halvorsen & Thor O. Thoresen, 2011. "Parents' Desire to Make Equal Inter Vivos Transfers," CESifo Economic Studies, CESifo, vol. 57(1), pages 121-155, March.
  13. Aysegül Sahin, 2004. "The incentive effects of higher education subsidies on student effort," Staff Reports 192, Federal Reserve Bank of New York.

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